13 May 2013

Chairperson: Mr M Johnson (ANC)

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Meeting Summary

Ncera Farms (Pty) Limited presented its strategic plan and budget. Its business model was centred on beef cattle and goats with other areas like mechanisation, skills transfer to smallscale farmers, vegetable/crop production (green pepper and tomatoes); and commercial farmers and community.

The Committee was informed that Ncera had no Board of Directors; no audit committee in place to help the entity in the improvement of internal controls; no internal auditors; no approved Turnaround Strategy with a clear mandate of the entity; and no Annual Performance Plan - this had been the case for the past years as well. Ncera was also faced with a lack of employment contracts for staff members who joined the entity before July 2011.

Ncera Farms had been under funded for many years and that the R3.3 million received from the Department was not even sufficient to pay salaries. The entity had to find R2.2 million to cover the salaries and the overhead costs.

However, Ncera Farms had potential if adequately funded or recapitalised and it could help in providing jobs for local communities, which had high unemployment rates.

The Committee raised questions on the absence of livestock on the Asset Register, the lack of a Board, a Turnaround Strategy, a lack of direction for the entity, expenditure of
taxpayers’ money on an entity whose existence was not justifiable, and the possibility of winding up Ncera.

The Advisor to the Minister of Agriculture said that the National Treasury had been consulted on the issue of Ncera Farms being a schedule 3B entity and the Department was to prepare a business plan. Once approved by the Minister she would submit to the Minister of Finance a request to delist Ncera Farms as a public entity and upon concurrence with the Minister of Finance, there would be a notice in the Government Gazette.

The Chairperson said that under schedule 3B of the PFMA, entities were expected to submit Strategic and Annual Performance Plans, but Ncera had not done so. The Committee would prepare a resolution on the entity for the 17 May meeting.

The Committee recommended referring the Fertilisers and Feeds Bill [B41-2012] back to the Department of Agriculture, Forestry and Fisheries so that it would carry out a proper consultation process, particularly in rural areas, in addition to redrafting of the Bill, taking into consideration all the concerns raised during the public participation process, and reintroducing the Bill in Parliament.

Meeting report

Introduction
The Chairperson said that following a meeting on 05 May 2013 at which the Committee was presented with the forensic report on the Ncera Farms, a decision had to be made on the way forward. There was need to get a sense of what happened on other farms that were within the ambit of the Department of Agriculture, Forestry and Fisheries (DAFF) to the extent that Ncera Farms should have learnt a lesson or two from those farms and vice-versa.

The Committee had to adopt a report of all the submissions following the hearing that took place, with Ncera Farms being one of the entities under DAFF that presented. This would be followed by a debate before the budgets and strategic plans of DAFF and the entities were accepted.

There was a written apology from the Hon. Tina Joemat-Pettersson, Minister of Agriculture, Forestry and Fisheries. No such apology was received from the Hon. Dr Pieter Mulder, Deputy Minister of Agriculture, Forestry and Fisheries. There was an apology from Ms N Phaliso (ANC) who was attending to constituency work.

Ncera Farms (Pty) Ltd Strategic Plan 2013: briefing
Mr Mzi Titimani, Chief Executive Officer, Ncera Farms, said that Ncera Farms’ mandate had not changed. The entity was a public company listed in schedule 3B of the Public Finance Management Act (PFMA) 1999 (Act 1 of 1999) with DAFF. The objective was provision of extension, mechanical services, training and agricultural support services to the farmers settled on Ncera farmland as well as the neighbouring communities.

Ncera business model and Implementation structure
The CEO said that Ncera wanted to concentrate on two core enterprises of beef cattle and goats. Some mechanisation unit training was done in the surrounding farms and communities. Farmers and communities were being assisted by the entity in terms of advice and business models. A transfer of skills to the farmers for livestock and crop production would be well within the mandate of Ncera.

The business model was centred on beef cattle and goats with other areas like mechanisation, skills transfer, vegetable/crop production (green pepper and tomatoes), and the commercial farmer/community.

The CEO said that Ncera was supposed to have a Management Board in terms of reporting. The Portfolio Committee was responsible for oversight. A Turnaround Strategy that had been developed by the entity was not funded. The entity was accountable to the Minister.

Ncera capital budget
The CEO believed that one of the major activities that would have to be embarked on would be fencing the whole or part of the farm. Ncera's business plan focused on employing casual labourers. Ncera had a history of not being funded to do any infrastructure. There was a need to increase the number of greenhouses and also to work on the internal fencing. The entity was not going to buy any goats and cattle during the financial year as there was a pressing need of training staff members, an area that was problematic whenever it came to audit, due to lack of a Board.

The CEO said that Ncera had tractors that were bought in 1985 and that most of them were of little or no value as they had broken down requiring budgeting for two tractors in addition to repairs and maintenance. The total capital budget for the 2013/14 financial year was R2 465 000.

After selling the dairy cattle Ncera embarked on the beef breed and talks had been held with the DAFF to determine what was to be done by Ncera to assist the DAFF in the mandate of the Livestock Improvement Programme. The agreement with the DAFF was that Ncera Farms going forward was going to be an entity focusing on the Nguni cattle breed. This was based on the desire to reclaim the Ngunis from the commercial farmers. The DAFF had a programme in the provinces focusing on livestock improvement for sourcing animals for farmers who had been chosen by the DAFF to focus on this particular breed. The Nguni breed was chosen because it was South Africa’s original breed and that it ate shrubs, bushes and vegetation that was less palatable. Ncera had agreed with DAFF in principle that the Nguni cattle breed was to be the way forward subject to the resolution of governance issues surrounding the entity.

Governance issues and challenges
Ms Khayakazi Guazela, Chief Financial Officer (CFO):Ncera Farms said that the entity had no Board of Directors to give guidance and help with governance issues. There was also no audit committee in place to help the entity in the improvement of internal controls especially with regards to the spending of funds. The entity also had no internal auditors to assess if the controls were working effectively and efficiently for both finance and performance. There was no approved Turnaround Strategy with a clear mandate of the entity, something that contravened the PFMA and National Treasury regulations. There was no Annual Performance Plan for the entity and this had been the case for the past years as well. The draft Turnaround Strategy and the Annual Performance Plans were, however, available

The entity was faced with a challenge of a lack of employment contracts for staff members who joined the entity before July 2011. A question was being raised as to whether the entity was a profit-making organisation or not.

Conclusion
The CEO said that Ncera Farms had been underfunded for so many years and that the R3.3 million received from DAFF was not even sufficient to pay salaries. The entity had to find R2.2 million to cover the salaries and the overhead costs. Ncera could be a functional entity if funded – talks with the DAFF were ongoing.

Stakeholders such as the community and chiefs had high expectations from the entity as one that could help them in many areas such as job creation. There were a lot of assets at Ncera according to the Asset Register but most of these assets were of no value, old and scrap – this was inherited. There were 10 farmers leasing land (2,200 hectares) 'unutilised that the Committee was aware of'. He added that Ncera could not be regarded as a profit making entity because it even lacked money to run its operations.

However, Ncera Farms had potential if adequately funded or recapitalised and it could help in providing jobs for the local communities, which had high unemployment rates.

Discussion
The Chairperson said that the Committee had set the meeting for 17 May 2013 with regard to the 10 farmers at which all the stakeholders would attend including the provincial counterparts - an invitation had also been extended to the DAFF. The Chairperson wondered if any other Parliamentary Committee had visited Ncera Farms prior to the Portfolio Committee on Agriculture, Forestry and Fisheries which had visited the entity in February 2010. An Assets and Liabilities Register had been received by the Committee to get a sense of what was going on at Ncera.

Last financial year when the Committee took a briefing from the DAFF on the Turnaround Strategy, Plans and Budget, an issue arose that required the DAFF and the entity to go back without knowing that this would have an implication on the actual budget of the Department – the Committee was able to correct that.

Mr L Gaehler (UDM) asked for an explanation on the non-inclusion of livestock on the Asset Register.

Mr A Trollip (DA) re-iterated the CEO’s confirmation that Ncera had no Board, no Turnaround Strategy, no direction for the entity and that there was no objective for it to exist and that the entity was underfunded. Mr Trollip said that the entity was actually ‘overfunded’ because it performed no good function to land reform, rural development or agricultural productivity improvement in the provinces. Its reason to exist was ‘questionable’ and the R3.3 million currently expended on the entity delivered no benefit to the people of the Ncera area or the Eastern Cape. Following the visits made to Ncera Farms, it was clear that there was no way that the entity would be able to generate a profit out of R2.2 million. There was no new Turnaround Strategy tabled before the Committee and so there could be no approval of the Annual Performance Plan.

When the Committee visited Ncera Farms, there was no evidence of skills transfer, skills upgrading, income generation and neither was there a hands-on practical exchange of training for beneficiaries of land reform.

The Chairperson said that the Committee had agreed tentatively at its sitting on 10 February 2013 that Ncera was not fulfilling its objects. The Committee was almost close to proposing that the initiative of Ncera Farms be aborted but there were legal implications for such action that would arise. The issues raised by Mr Trollip were relevant. However, the Committee had moved beyond them.

Mr Trollip said that taxpayers’ money was being expended on an entity whose existence was not justifiable. The Committee was not fulfilling its fiduciary responsibility in meeting to discuss an entity that was failing, if no concrete resolutions were being made about the way forward. The Committee had to make a resolution on the entity, have an investigation or discuss the forensic report, but meetings at which no decisions were made were a waste of time. The tractors at Ncera were unserviceable and the entity was not providing any service to the villagers.

The Chairperson said that the Committee had gone through this process but the question that remained for the Committee was on the way forward.

Mr B Bhanga (COPE) said that all decisions on Ncera could not be taken without meeting with all the stakeholders at a meeting scheduled for 17 May 2013. He asked if Ncera after 13 years was close to achieving its objectives and what had hindered the achievement of the objectives. According to the forensic report, it was indicated that the entity was not meeting the requirements of the National Treasury and yet the proposal from the CEO was that the Government should continue funding the entity – what was the justification for the expenditure? What was the role of the caretaker and what had he been doing all these past years to turn the entity around? What was the vision of the DAFF – was the expenditure on Ncera Farms one that should continue or should the entity be closed down?

Ms M Pilusa-Mosoane (ANC) said that no Strategic Plan could make Ncera work because the entity had no budget and board. The Committee could not take a move forward without the budget and that there was no relevance for the debate in the absence of this budget. The assets of the entity were also old and could not work any more.

The Chairperson said that the questions raised were important but he reminded the Committee that the purpose of the meeting was to consider the Strategic Plan and that the Committee had to make a call on that aspect.

Mr Trollip said that there was an incomplete Asset Register, no Annual Performance Plan and the funds were not enough to cover the operations of the entity and therefore, for all intents and purposes, Ncera Farms could not receive any money from the Government – Parliament would not endorse this.

Mr Bhanga said that some responses would be expected from Ncera. Questions raised by the Committee Members had been dealt with and the agreement was that the Committee was not adopting the Strategic Plan. A decision would be taken on Friday at which all the stakeholders would be present. The Chairperson added that the issue concerning the Asset Register would be dealt with on Friday. The Committee was accepting the budget minus its activities. The operational aspects (such as staff) of the entity would be accepted because of the legal implications but on Friday the DAFF would be expected to outline the legal processes going forward.

Mr Gaehler said that the DAFF was expected to verify the assets and then make a presentation to the Committee otherwise it would end up in a ‘looting spree’. Why had the DAFF taken no action against officials who were involved as indicated in the findings of the forensic report - some of the officials were in the employment of the DAFF.

Dr Sizwe Mkhize, Deputy Director-General: Food Security and Agrarian Reform: DAFF said that the Department would uphold any resolution taken by the Committee on Ncera Farms.

There was need to look into the merits of the existence of Ncera Farms. 13 years ago the provincial departments were doing the kind of work that Ncera was doing and the question to be answered was the relevance of Ncera Farms, if there were existing departments that were doing similar work – these were issues that management in the Department was discussing.

With regards to Ncera non-compliance, DAFF fully agreed that there was no board of directors in Ncera and having one would require more resources from the Department and the same applied to the audit committee. The DAFF did not want to spend money on an entity that was doing little versus the investment that had been made.

The Chairperson said the allocation of R3.4 million from the Department to Ncera was not premised on a plan. There was currently nothing to accept in accordance with the PFMA. He posed a question as to what next, considering that a budget had to be passed? Legal personnel had to advise on this matter.

Mr Gaehler said that the budget should fall away in the absence of the Annual Performance Plan and budget by the entity and that the Department should deal with the issue of staff.

Mr L van Dalen (DA) said that winding up the entity required a process. People that worked needed to be paid and a curator had to be appointed. DAFF had to inform the Committee of the process involved.

Mr Duncan Hindle, Advisor to the Minister of Agriculture, said that the National Treasury had been consulted on the issue of Ncera Farms being a schedule 3B entity and what was decided was that the DAFF had to prepare a business plan talking about the transfer of assets and what would happen with the staff. Once the business plan was approved by the Minister she would submit to the Minister of Finance a request to delist Ncera Farms as a public entity and upon concurrence with the Minister of Finance, there would be a publication in the Government Gazette.

Dr Sizwe Mkhize said that the DAFF would be ready to act in accordance with the decision of the Committee - DAFF could not pre-empt the decision to be taken by the Committee.

The Chairperson in concluding this matter said that under schedule 3B of the PFMA, entities were expected to submit Strategic and Annual Performance Plans, but Ncera had not done so. The Committee would as such prepare a resolution on the entity for Friday’s meeting.

Mr B Bhanga (COPE) said that the DAFF had to be ready for any decision that would be taken by Parliament on Ncera Farms.

Fertilisers and Feeds Bill [B41-2012]: deliberations
The Chairperson said that the Committee was at a stage where it had not made a forward move with regards to the Bill due to a number of reasons including the retagging from a Section 75 Bill (Bills not affecting provinces) to a Section 76 Bill (Bills affecting provinces). As a way forward, a resolution had been prepared but it required inclusion of other relevant areas. The Chairperson read out the proposed resolution in which it was observed that there had been no proper consultation on the Bill and thereby the Committee recommended that the Bill be referred back to the Department of Agriculture, Forestry and Fisheries so that it would carry out a proper consultation process on the Bill particularly in rural areas and that the Department reconsider the redrafting of the Bill taking into consideration all the concerns raised during the public participation process and reintroducing the Bill in Parliament.

The Committee was also not satisfied with the consultation process in the sense that some stakeholders who would be impacted by the Bill had not been consulted. These included among others: poultry industry, agriculture industry, citrus growers and some developing farmers. Another area of interest related to stakeholders who were not satisfied with some of the definitions in the Bill such as ‘home-mixer’ and ‘south-mixer’ which, although they related to agriculture, sounded ambiguous. The other area of concern was the human resource and financial capacity to implement the Bill.

Mr Bhanga and Ms Pilusa-Mosoane supported the recommendations.

Visit to Ncera Farms (Pty) Ltd: Draft Committee Report: Consideration and adoption
The Chairperson said that since most Members had not read the Report, it would be scheduled for adoption at the meeting to take place on Friday.

Committee minutes: adoption
The Committee adopted its minutes for 17 March 2013, 16 April 2013, 17 April 2013 and 18 April 2013.